Selling a business
The key to selling a business is to make the business as attractive to as many potential purchasers as possible. This should generate the most interest and result in achieving the best price, especially if competing offers are received.
The most difficult part of a sale is finding potential purchasers, and real value can be added by engaging an expert professional to carry out the research and marketing process. An expert will also be able to guide the seller through the various stages of a sale to completion.
As part of the planning process, the owners will need to consider the minimum price they would need to be able to sell for now and what sort of handover period would suit them.
How to sell a business
The process for selling a business is:
- Planning the disposal
- Getting ready to market the business
- Marketing the business for sale
- Due diligence
How can I sell my business fast?
The sale process can take 3 to 12 months once a business is ‘put on the market’. Therefore, the key to achieving a fast sale is to engage expert professional assistance as soon as possible so that the planning and preparatory work can be carried out in good time.
When is the best time to sell a business?
The best time to sell a business is when it can demonstrate a period of sustainable profits and future growth prospects, usually following an exit planning process. Sometimes a particular business sector can be ‘flavour of the month’ which can also be an ideal time to sell.
How do you value a business?
The valuation of owner-managed and family businesses is not an exact science and there are several methods of valuation.
Most will be valued on the ‘Earnings’ method, potentially combined with the ‘Net assets’ method if they have significant assets.
Earnings – The earnings valuation basis involves the application of a multiple to a business’ maintainable post-tax profits.
Net Asset – In this valuation method assets in the balance sheet are revalued to present market values.
Accepted industry methods – Certain sectors have generally accepted valuation methods based on for example; multiple of sales or the number of customers.
Discounted Cashflow – This valuation method uses a business’ projected cashflows and discounts them to present value. It is usually used where the business has minimal historical trading results.
Dividend yield – Dividend yield is the income return to shareholders expressed as a percentage of the amount invested. This method is usually only applicable to the valuation of minority shareholdings.
How can I make my business more sellable?
A business can be made more sellable by:
- Growing profits
- Generating recurring income
- Minimising working capital requirements
- Having a clear strategy and management structure
- Systemising procedures across the business
- Looking at new markets and innovation
- Developing a presence online in its sector
Do you pay tax when you sell a business UK?
The tax liability will depend on whether it is an asset or a share sale and also on the structure of your business. You may be able to claim Business Asset Disposal Relief, which would reduce the Capital Gains Tax on the gain to 10% in certain circumstances.
Our team has a history of successfully completing deals (22 with a combined consideration of over £16 million) means we have the expertise and proven track record to help with selling your business.
How Saleable is Your Business? Our free assessment tool has been designed to show how saleable your business currently is. Answer 12 simple questions and receive your current score and tailored explanations at Free How Saleable is Your Business Assessment
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Latest Video: Business Disposals
Chris Kelly of Jacobs Allen talks about important considerations when you are thinking about planning for selling a business.
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Deciding when to sell out of a business is a difficult decision that depends on a variety of factors. It should align with your personal and financial objectives and a clear understanding of the business’s value in its current state.
Selling a start-up is difficult as they usually wouldn’t attract acquirers due to the early stage of the business. If they did attract interest the acquirers would most likely want the founders to remain and hold a stake in the company as it grows.
Selling your sole trader business is similar to the sale of a limited company but due to the smaller size of these businesses they are often only marketed for sale by advertising on business sales websites due to cost.
Selling your company to investors involves a strategic approach, including the following elements: Drafting a well-structured business plan. Identifying potential investors. Developing a pitch presentation highlighting your teams expertise. Showcasing your business by networking and entering competitions. Negotiating terms offering a fair rate of return on investment.
Transferring ownership of a business involves well-defined steps to facilitate a change in control. A comprehensive sales agreement is drafted by the buyer with the assistance of legal experts, outlining the specific terms of the transfer, encompassing price, assets, liabilities, conditions and protecting the interests of both parties. Any necessary regulatory approvals are obtained, and legal requirements fulfilled, such as obtaining business licenses and permits. Once all these are points are dealt with the transaction in finalised by both parties signing the agreement and transferring funds.
When selling a business, the key steps are usually: Assessment of the company’s value. Development of a marketing strategy to attract potential buyers. Negotiations with interested parties, covering terms such as price, payment structure, and contingencies. A Due diligence process, during which the buyer examines the company’s records and operations. A formal legal agreement is signed, involving legal and financial professionals to finalise the documentation.